Signing a contract may seem like a mere formality to an agreement between you and another party. However, if you do not validly sign a contract, your agreement may not be legally binding. This article will set out how you can validly sign a contract with an individual or a company.
If you sign a contract, you must:
- ensure you have a witness for your signature;
- date the day you signed the contract; and
- insert your Australian Business Number (ABN), if you have an ABN.
Your witness must:
- be aged 18 years or older;
- not be a party to the contract or receive any beneficial interest under the agreement; and
- be present when you sign the contract.
If you are signing a statutory declaration, your witness:
- should be an authorised witness (such as a Justice of the Peace);
- will be able to see your face; and
- must know you for 12 months or longer, unless they sight any original identity documents that you provide.
Different legal documents, such as leases, may have other requirements. If you are in a partnership agreement, you must ensure each partner signs in their capacity and has a witness to the signature. The same person can witness the signatures of all partners.
The Corporations Act provides ways that a contract can be validly signed by a company.
These methods include signatures by:
- directors and company secretaries;
- common seal;
- people with authority; and
- people with a registered power of attorney.
Directors and Company Secretaries
The most common way that companies execute agreements is to have the agreement signed by the directors and secretaries of the company.
A company has validly signed the contract if the signatures come from:
- two directors of a company;
- one director and one company secretary; or
- the sole director who is also the company secretary, for proprietary companies only.
You must be registered as a director or company secretary when you sign the contract. State your full name and position underneath your signature.
If you are the sole director of a company, make sure you have registered yourself as the sole company secretary. Otherwise, you will not have validly signed the contract.
If you are not sure whether the other party has validly signed a contract, you can obtain the company’s details from the Australian Securities and Investments Commission (ASIC) register. The ASIC company extract (which you can obtain for a fee) will list the current directors and company secretaries of the company. If the person who signed the contract does not appear on the ASIC extract as a director or company secretary, the company may not have validly signed the contract.
Companies can also valid sign contracts by stamping the company common seal on the contract. Two directors, a directory and company secretary (or the single director if it is a one-person company) must witness the stamping.
The seal must contain the company’s Australian Company Number (ACN) and the company’s registered name.
Signing with a common seal is uncommon. Large companies may use a common seal if signing major contracts or contracts with overseas parties.
People With Authority
A company can also sign a contract through an individual who has the express or implied authority of the company to bind the company under the contract.
Large organisations often use this method because it would be impractical for directors to sign every contract. The company appoints people as authorised signatories who can sign documents on the company’s behalf.
However, some company representatives (such as employees) may pretend to have that company’s authority when they do not. You could still rely on the signature to the contract if the person had implied to you that they had the authority to sign the contract as the company. However, if the company disputes the validity of the signature, you may get involved in a time-consuming legal battle over whether the contract should remain binding.
Therefore, if you are not sure if the person who has signed the contract has the authority, you should ask the company to provide evidence. The evidence can come from the company’s constitution or board meeting minutes. Ultimately, you must decide based on the evidence that the person has the authority before signing the contract on your end.
People With a Registered Power of Attorney
Alternatively, a company can sign a document through a registered power of attorney. A power of attorney is a legal document that allows someone (in this case, a director of a company) to appoint someone who can make decisions for them on their behalf.
Like authorised signatories, companies use this method to bypass the need for directors or company secretaries to sign every legal document. However, a registered power of attorney may be a more reliable way to establish the validity of a signature from someone who is not a director or company secretary.
A power of attorney can also help set out who can sign what documents and how many signatures are required.
You must register the power of attorney for the legal document to be valid.
If you want to confirm the attorney’s authority, you can get a copy of the registered power of attorney from the NSW Land Registry Services and check if their details are listed in the document.
Other states or territories may have different requirements. Additionally, a company does not have to follow the above processes. The company constitution can set out rules around how contracts are signed on behalf of the company.
You should be aware of the ways that a contract can be validly signed, whether you are dealing with an individual or with a company. You should also ensure that the other party to the contract has also validly signed. Otherwise, you may not have a legally binding contract. If you have any questions, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
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